Public Bill Committee

[Hywel Williams in the Chair]
Written evidence to be reported to the House
GB14 Gibraltar Betting and Gaming Association
GB15 Gambling Commission

New Clause 3  - Remote gambling licensees and customer protection

‘Holders of licences for remote gambling operations shall be required to participate in a programme of research into and treatment of problem gambling in accordance with arrangements to be determined by the Secretary of State in regulations in the form of a statutory instrument approved by both Houses of Parliament, and a levy for that purpose may be imposed under section 123 of the Gambling Act 2005.’.—(Clive Efford.)

Brought up, and read the First time.

Clive Efford: I beg to move, That the clause be read a Second time.

Hywel Williams: With this it will be convenient to discuss the following:
New clause 5—Review of connection between non-paying social networking media gambling activities and use of licensed remote gambling operations—
‘The Secretary of State shall conduct a review into whether and how the existence of non-paid for gambling activities on social networking media interacts with use of licensed remote gambling operations, and whether such non-paid for activities can act as an inducement to participate in paying activities.’.
New clause 9—Consultation on self-exclusion—
‘Having regard to the significance of the remote gambling market in relation to potential problem gambling, the Secretary of State shall consult on a system of standardised self-exclusion for the gambling industry, to include means of addressing exclusion from remote gambling access in the context of other gambling media.’.
New clause 12—Gibraltar and Alderney—
‘The Secretary of State shall conduct a review comparing the effectiveness of UK licensing in comparison with the licensing regimes of EEA and white listed countries in relation to—
(a) suspicious betting, playing or sporting activity;
(b) under-age gambling; and
(c) protection measures in place for gambling customers;
and lay before both Houses of Parliament a report containing the findings of such review.’.

Clive Efford: It is a pleasure to be under your chairmanship again, Mr Williams. I hope we are through a large part of our considerations on this Bill and that we can make swift progress. However, there are still some important items to discuss.
New clause 3 refers to a levy for research and treatment. I will go into that in detail in a moment. New clause 5 concerns free gambling on social media websites—many people are concerned about the influence that has on young minds, and whether that is an area where we should consider further regulation.
New clause 9 covers an important area of concern. It is about creating an easy-to-understand one-stop shop across the whole of the gambling industry; but in particular, in relation to this Bill, for the remote gambling industry. New Clause 12 makes sure that any regulations adopted regarding licensing the advertising of remote gambling services to those within Great Britain meet the highest standards. There should be no lowering of standards as a result of those services being licensed here rather than in European economic area countries or, in particular, Gibraltar and Alderney, which have detailed requirements in their licensing codes on the protection of vulnerable adults.
Problem gambling is the subject of one of the key objectives of the Licensing Act 2003 in relation to the protection of vulnerable people. We have a duty to ensure that we protect children and those who may develop a gambling problem. While problem gambling prevalence is low, online gambling is a growing industry, and the isolation in which it is possible to play online means that we must set the highest standards when we regulate. The industry is changing. The UK online gambling industry is now worth over £2 billion a year. We are now seeing terminals in betting shops offering access to remote gambling. The ability to gamble without leaving the house and without face-to-face communication presents a number of challenges for controlling problem gambling—we cannot afford to be unprepared. The industry has known this is coming for many years, and we can safely assume that those who intend to flout the rules have been preparing for the moment when this regulation will take effect. We must ensure that the Gambling Commission is prepared and capable of setting the highest standards.
In her evidence to the Committee, Jenny Williams, chief executive of the Gambling Commission, disputed the claim that the licence conditions of the Commission are weaker for white listed jurisdictions. She said:
“I think there have been some misunderstandings: all the conditions that the gentleman from CARE”—
who gave evidence to us last week—
“was referring to are in our codes and technical standards—he might not be aware of our technical standards.”––[Official Report, Gambling (Licensing and Advertising) Public Bill Committee, 12 November 2013; c. 54.]
I have been in touch with Mr Boucher, to whom Jenny Williams was referring, and he accepts that he was not aware of the technical code. That in itself is a bit alarming because these are people who are well informed about the gambling industry and certainly the dangers of the gambling industry. If we take legislation at the top, then the licensing code, and finally the technical code, we would have thought that those well-informed people who monitor the industry would be aware of that third tier. That in itself suggests a problem. Jenny Williams did accept that she was surprised and alarmed that somebody who knew the industry well was not aware of the technical codes.
However, even having looked at the technical codes Mr Boucher was not entirely satisfied with what we were told in Committee. He refers to the licence codes in Alderney. Alderney is very prescriptive about what is required of licensees. He also refers to the Gibraltar code, which says:
“Licence holders should ensure that systems are in place to warn customers not to gamble beyond their means to pay, and should have systems in place to take into account information (such as communications and contact by the customer or advice/information from financial institutions) that indicates that the customer may be gambling beyond their means. Where this occurs the licence holder should initiate measures to assist the customer manage their gambling. This should include the generally available facility to set controlled, daily deposit, time or gambling limits, and self exclusion. The Commissioner will monitor local arrangements before considering whether specific standards for limits should be set.”
Mr Boucher goes on to say:
“While the wording of this code is clearly not as detailed as the provisions in Alderney, the wording also seems to us as more effective than the wording of the UK technical standards document.”
Those are the standards referred to by Jenny Williams. He continues:
“In the Gibraltar code the ‘generally available facility’ seems in our understanding to indicate much more than a simple duty to ensure that before a person makes their first deposit they are asked whether, if or how they would like to limit their gambling. It is after a person has already started gambling that they are likely going to want to limit their gambling.”
I would like to hear from the Minister whether her Department has considered this matter in the light of the evidence we took last week. Does she feel this is something worth looking at again? I know she will say that it can be dealt with in the code. That is the consistent line we hear: “It will be sorted out in the code; the Gambling Commission will sort it out.” We have a responsibility to be clear. We want to hear from the Minister what she is telling the Gambling Commission that her expectations are.
The Government have said that the Bill is about consumer protection, which I accept. However, we do not have a corresponding review of the Gambling Commission’s code. That would show the Committee what is being done alongside the legislation we are considering. That is a weakness in the process. The expanding responsibility of the Gambling Commission—in that we are now going to be licensing operators who currently cannot enter our market because they are not licensed by an EEA country or a white listed country—must include a review of the code. If we were able to look at the two alongside each other we would be able to satisfy ourselves more on that. In the absence of that, I am keen to hear from the Minister what is happening about the review of the code to address those issues. Otherwise, it is necessary for us to add a requirement to the Bill.
On research and treatment, we currently have a voluntary system of contribution. There are powers under the Gambling Act 2005 for the Secretary of State to introduce a levy to contribute towards investment in treatment and research. It is important to do that. I would like to hear from the Minister how she sees that developing. We have voluntary contributions to very good organisations that work for people who develop problems with gambling. However, we also have a hugely expanding market. We constantly hear that the speed at which technology is being developed in the field far outruns the resources that go in to catching up with those new forms of gaming and gambling, especially those on the internet.
We need to be sure at the outset that this is an opportunity for us, when we are legislating, to take a close look at what is being done in protection, research and treatment to ensure that we are armed in the future to identify and deal with problems when they arise.

James Duddridge: The hon. Gentleman has talked eloquently about the problems of online remote gambling, where there are none of the checks and balances in place that one might see in a casino. Would he be minded to consider supporting on Report an amendment that would allow online gambling in casinos? That liberalisation could, paradoxically, provide additional protection, because it would put gamblers with potential problems into a much more studied, thoughtful and supportive environment, where the levy is being spent.

Clive Efford: I am grateful to the hon. Gentleman. I think I might be ruled out of order if I go into too much detail in responding to him. That is the first time I have ever heard a casino described as a treatment centre, where people will be cared for lovingly while they are parted from their hard-earned cash.
If we are to allow online gambling on machines, we need to take a cold, hard look at whether to allow devices to be made to look like a machine but which are effectively a computer that allows gambling on the internet, with lowered restrictions on prizes. I do not think now is an opportunity to introduce that change.
The hon. Gentleman is tempting me away from the new clauses. We will no doubt have that debate on Report. We can look forward to considering the suggestion in more detail, because I am aware that there is support for that—

Gerry Sutcliffe: Hear, hear.

Clive Efford: Particularly from influential Members on both sides of the House. I will be listening carefully, because some of the people who will be supporting that measure will be speaking from an extremely well-informed position.

James Duddridge: I am aware that some senior people with a lot of experience of the sector—much more than me—would support such an amendment. Perhaps colleagues and I should have tabled an amendment in Committee. Perhaps we have not missed the boat, but left it a little later until Report. Will the shadow Minister consider imploring the Government to table a suitable and well-drafted amendment, rather than have us fall into the trap of drafting a flawed amendment that is then knocked down by Back Benchers on the Floor of the House?
 Clive Efford  rose—

Gerry Sutcliffe: Will my hon. Friend give way before he answers that question?

Clive Efford: If it is on the same point.

Gerry Sutcliffe: It is. Perhaps the hon. Member for Rochford and Southend East is right that an amendment should be forthcoming, but I hope the delay gives the Government time to meet the industry and go through the practicalities of what needs to be done before we consider the Bill on Report.

Clive Efford: I am sure that the Minister has heard what both hon. Members have said and will consider whether she wants to table her own amendment, although somehow I doubt it. Given the attention to drafting of the hon. Member for Rochford and Southend East this morning, I am sure that whatever amendment he drafts will be perfect in every way.
New clause 5 is a probing measure about free playing on social media networks. We are dealing with the advertising of gambling, but there is a legitimate concern about how gambling is promoted on social media networks. As a parent, I can speak with a great deal of authority about the amount of time that children spend on these networks. The problem is not that they are losing money—if they were, they would be losing not their own money but that of their parents, which is probably even worse, certainly in my case—but the forming of the habit. They are not being coerced, but they are introduced to the habit of gambling at a very young age, without experiencing losses.
There is a danger that free online gambling is akin to what we have heard about the tobacco industry in the past, whereby young people have been encouraged to smoke tobacco in order to keep them as customers for a long time. I understand that gambling does not have the sort of addictive quality of nicotine, but we are right to be concerned about a similar introduction to gambling. There are elements of online gambling that allow someone to win money—albeit virtual money on the internet—so people can get the sensation of winning sometimes quite large sums.
Some of those who gave evidence last week expressed serious concerns about social media networks and gambling. Professor Jim Orford said:
“Free play sites and practice sites are a particular worry to us. A lot of those sites are not so well protected. In effect, they are providing gambling and almost certainly training the next generation of adult online gamblers.”
He went on to say:
“All our information is that parents are not well clued up about the dangers for their children. They know about drugs as well as a number of other worries, and they now know about internet pornography, but they do not yet know much about the dangers of gambling and internet gambling. I would like see protection for children against such dangers and information for parents and families made much more prominent in the Bill.”
Later in that sitting, he said:
“You may be betting on something that is not roulette or it may be a social game that enables you to earn the coinage of the game.”––[Official Report, Gambling (Licensing and Advertising) Public Bill Committee, 12 November 2013; c. 40-45, Q9 and 20.]
He was referring to the sorts of sums that people can imagine they might win, were they playing for real.
We should be taking this issue into consideration. We have an opportunity to hear from the Minister whether the Government are concerned about free gambling on social media networks and its impact on our younger generation. If there is none available, do the Government think that research into the impact of such gambling on young minds should be carried out?
New clause 9 relates to a one-stop shop for self-exclusion. The wide variety of gambling websites available makes the protection of vulnerable adults difficult. A problem gambler can self-exclude from all the shops in their high street. However, although exclusion from the four or five high street names in their local area may have a limited impact on their ability to bet in a betting shop, that is no use whatsoever on the internet, because there are literally hundreds of sites that a problem gambler could use to get around their self-exclusion from a site. It is therefore nonsense to say that self-exclusion is going to be effective for people who have a problem with remote gambling. Somebody might want to self-exclude, but without a one-stop shop system covering the whole industry and administered by the Gambling Commission, it is simply not going to work.
Professor Orford said that
“many problem gamblers find self-exclusion very useful. I have spoken to a number of people who have said: ‘Yes, it has really been a saviour for me, being able to self-exclude from the place where I normally gamble’.”
Again, that highlights that self-exclusion can work if it applies across the whole system. If it works only where people normally gamble, the scope of the practice is inevitably limited. We are potentially allowing new operators into the market and should be looking to strengthen protections. Dan Boucher told us:
“I would have expected that, at the same time as effectively liberalising advertising, a step would have been taken to afford greater protections to vulnerable problem gamblers, with a recognition that self-exclusion does not work in an online context. It can logically work in an offline context. You can self-exclude from the four gambling shops in your local town, but it is...useless and meaningless”––[Official Report, Gambling (Licensing and Advertising) Public Bill Committee, 12 November 2013; c. 37-40, Q3 and 9.]
on the internet. If we are to strengthen self-exclusion, we should have a standardised list, or what I would call a one-stop shop.
CARE has indicated that there is strong support for a one-stop shop. It stated that it spoke to problem gamblers who said,
“a one stop shop self exclusion service for online gamblers would be very helpful to them and others like them.”
According to a survey conducted by the university of Salford, 72% of gamblers agreed that
“For self-exclusion to work all sites need to cooperate to have an industry wide self exclusion system”.
Academia also support the call for a one-stop shop. Dr Sally Gainsbury, author of “Internet Gambling: Current Research Findings and Implications”, states that “a significant limitation” of self-exclusion
“is the lack of collaboration between different online gambling sites and venues, so that excluded individuals may find it easy to gamble at another site or venue.”
CARE states that the Bill
“makes the current lack of one stop shop self-exclusion unsustainable for the simple reason that it will result in more advertising as companies in black listed countries gain licenses and the opportunity to advertise.”
People will therefore simply slip from one site to another, making self-exclusion totally ineffective.
The technology already exists to deal with the problem. Dr Sally Gainsbury mentions that a program called VeriPlay, developed by Bet Buddy, allows the secure exchange of anonymous data. It allows operators to check whether a player is on a centralised list of players who have self-excluded. We should wish to offer the greatest protections possible to people who might develop a problem with gambling. If they want to self-exclude, we should ensure that that process is effective and that the whole industry is covered.
New clause 12 deals with Alderney and Gibraltar. It is probing—I shall not press it to a Division—but I would like the Minister to speak about it. There is a worry that the licensing arrangement that will come into force under the Gambling Commission as a result of the Bill might water down some of the requirements on operators regarding the protection of vulnerable adults and children. I urge the Minister to ensure that that is not the case.
We spoke earlier about the kitemark. We should be setting the highest standards, and the badge of the Gambling Commission should be proudly presented by operators to show that the industry is highly regulated with the highest standards of protections for people who might develop problems with gambling. Such a mark would show that a site represented a safe environment in which to gamble. The Government will not want standards to slip as a result of the Bill, so it is right that we ask whether there is any possibility that that might happen.
Let me ask the Minister one or two questions. Jenny Williams talked about technical code, but would the Government wish to see the code altered? Some important issues for protecting vulnerable adults are tucked away in the technical code. Even if the Government do not think we should regulate that in the Bill, should it not be reviewed? The people who gave evidence were extremely well informed, and if they did not know that that technical code existed, alarm bells should be sounding through the Government.
On self-exclusion, Mr Boucher has said:
“Our point was that neither the Bill nor the Gambling Commission Codes make provision for 'one stop shop self exclusion' for online gamblers. Self-exclusion is profoundly flawed in an on-line context because, whilst it is possible to self-exclude from the four betting shops in your town on a strong day, it is never possible to self-exclude from all the online gambling opportunities open to you in your own bedroom for the simple reason that after self-excluding from four there are still hundreds if not thousands of online gambling opportunities available to you. This is a problem that arguably should have been addressed already.”

James Duddridge: While it is laudable to extend the exclusion more widely, one can draw a comparison with alcohol. It would be almost impossible for an alcoholic to exclude themselves from buying alcohol at every single point and we would never attempt to do so—we would see it as unreasonable. Is the hon. Gentleman searching for a worthy but unachievable utopia?

Clive Efford: I would accept that point were it not for the fact that the principle of self-exclusion has already been accepted and attempted by the industry. In many respects, the industry has used the principle to show what it is attempting to do to protect vulnerable people. We are saying that the existing process for self-exclusion is not viable online. If we are serious about having a self-exclusion process, we should have one that is effective for those who want help.
To put this in the context of alcohol, would we not want to exclude someone if they self-excluded? We are not talking about telling someone that they cannot gamble anymore; we are talking about someone who has said, “I have a problem. Please stop me if I try to gamble.” If someone had an alcohol problem, especially to the point where drinking might cause them serious illness or worse, we would want a system that allowed them to self-exclude in that way. I accept that that is impractical given all the outlets available, but we know the gambling outlets and they are all licensed. The technology exists whereby the gambling industry could sign up to a self-exclusion process, but we need the will to drive the process forward.
The gambling industry is worth some £6 billion a year, yet a relatively tiny sum is spent on research into or the treatment of problem gamblers. The Responsibility in Gambling Trust plans to redistribute £5.3 million, with 10% of that going on research, 6% on education and 84% on treatment, to the year ending 31 March. I got that information from looking through its webshite—[Hon. Members: “Oh.”] Just checking whether you are awake. You passed with flying colours; well done. Perhaps I should drink some water. I will try to complete my speech while drinking this glass of water.

Hywel Williams: I was certainly awake.

Clive Efford: Let us hope that Hansard was not but, as hon. Members referred to it, it will probably be on the record. Anyhow, I said “website”.
I was surprised that, on the Responsible Gambling Trust’s website, many of its press releases are on fundraising. It struck me that, in such an enormously wealthy industry, perhaps the trust might be able to raise money from the industry that it monitors to treat those who need help as a result of that industry. The trust arranged a trek up Kilimanjaro to raise funds for research and treatment of people with gambling problems. I do not want to decry the efforts of the people who went up Kilimanjaro as that is a huge trek, which would have been rewarding, and they were doing a fantastic thing to raise money for such an important issue.
I also noticed that the Responsible Gambling Trust said goodbye to its director of fundraising; that group went up Kilimanjaro in October and she left in September. Her valedictory speech must have been interesting, in which she said, “By the way, you are all going up Kilimanjaro—I’m off.” Next year, the trust plans a trip across the Sahara desert to raise money. I commend it for that, but I question why so much of its efforts has to go into raising money when a levy could allow it to put more of its resources and effort into what it exists to do. I urge the Minister to consider using her powers under section 123 of the 2005 Act to formalise a levy.
One of the people who we invited to give evidence, but who, given the short time scale, was unable to do so was the director of the National Problem Gambling Clinic, based in London. She wrote to my office and gave permission for me to quote her e-mail. She said:
“I am writing to you as the Director of the National Problem Gambling Clinic not in my role as member of the Responsible Gambling Strategy Board.
I believe that any gambling company, including the ones based offshore, if making money out of British gamblers, should be accountable in terms of practice and governance to the Gambling Commission. I also believe that they should comply with RGT’s requests for contributions towards treatment, education and prevention of problem gambling.
I think it is important for the offshore industry to still come under similar governance issues in relation to the well-being of gamblers by making sure that any significant problem gambling behaviour gets picked up by their software.
Chasing losses and significant hours of play or financial losses can all be tracked. This is particularly easy with remote gambling as patterns of play can be recorded over time for individual players and as a group average.”
I urge the Minister to listen to those words, because that lady is eminent and highly respected with regard to the treatment of problem gambling.
We can use technology to track the behaviour of problem gamblers: those who are chasing losses, for instance. Algorithms can be applied and those people can be identified. The contribution from the industry is not sufficient; more should be done to ensure that it contributes significantly towards the research and treatment of problem gamblers. We should look at free gambling websites and ensure that the standards we introduce under the new licensing regime do not in any way reduce the licensing requirements on licensed operators. I look forward to hearing the Minister’s response.

Paul Farrelly: I want to make some comments on new clause 12, in particular on the issue of the protection of the consumer. This new clause is probing, as my hon. Friend the shadow Minister made clear, but it is relevant to a consultation that is being conducted at the moment by the Gambling Commission, which closes imminently on 4 December. It would be interesting for the Committee to hear the Minister’s remarks on some of the key issues when she responds on this new clause.
Two consultations are being run at the moment by the Gambling Commission. One is on the general changes to the licensing conditions, in which the main outstanding issue is the key definition of a Great Britain consumer, or a UK consumer. The other is on consumer protection and the disclosure to customers of what happens to their money that is held on account—often winnings to be used in future bets—if something happens to the company. That is the centrepiece of this consultation.
To date, the Gambling Commission has adopted a caveat emptor approach, along with a minimum disclosure level. The terms and conditions make it clear to a person, before they sign up, what happens to their moneys that the company holds. As the Gambling Commission rightly identified, there is a gap between what customers think will happen to their money in the unfortunate event of something happening to the company and what is actually the case. That was rightly identified by the commission, and it would be interesting to hear the Minister’s remarks on the new clause.
To date, the remote gambling sector has not been a central issue for the Gambling Commission because most of the licensed operators are not registered with it because they are offshore. Of course, the new regime institutes a whole new ballgame in the UK. In the interim, there has been the 2011 case of Full Tilt Poker. I will not go into that case too much, but it was one of the world’s leading poker websites. It was regulated in Alderney, which adopted the same caveat emptor approach as our Gambling Commission. In April 2011 its website was seized by the FBI, and after a review in September 2011 the Alderney commission withdrew its licence. We heard evidence in the Select Committee that Malta refused Full Tilt a licence because of its concerns about customer protection. New clause 12 urges the Minister to compare and evaluate different licensing regimes, particularly if we are to endorse at arm’s length the approach taken by regimes overseas.
What happened in the Full Tilt Poker case is that the company eventually came to a settlement with the US Department of Justice, and was taken over by PokerStars, another well known firm. A large amount of compensation was paid to settle a civil suit. What was key to that settlement was that $184 million held by non-US gamblers was made available to the customers, many of whom were in the UK.
In March last year, an old hand, Peter Dean, reviewed Alderney’s methods and what it had done—the processes that Alderney went through are relevant to new clause 12. Basically, the Dean report cleared Alderney of any substantial breaches and failures of procedure, but it said that lessons need to be learned. First, a regulator needs proper resourcing to fulfil its task. Secondly, a regulator needs direct contact with the management and the key figures in the organisations it regulates, rather than those relations being conducted at arm’s length through lawyers, for example. The third key point, which is relevant to new clause 12, is that Mr Dean did not reach any conclusions on the way forward for consumer protection. That is the hole that the Gambling Commission is trying to fill. No doubt, in due course, it will be followed by Alderney and some of the other states if it gets it right.
It would be great to hear the Minister’s thoughts on the options that the consultation is putting to the industry. The first option of no protection, just to go away and mingle funds, is clearly unacceptable. The second option is to segregate the accounts between customer and company. That sounds logical but does not protect against fraud or misuse. In that situation, as the Commission identifies, the term “ring fencing” can be abused to give customers a level of assurance to which they are not entitled on the basis of what is really going on.
The third option is very interesting; it is a mechanism called the quistclose trust. I would like to hear the Minister’s thoughts on customer protection in that regard. Many operators already have something like that mechanism—although I will not name any names—or arrangements tantamount to that. It arose from a legal case in English law, Barclays Bank Ltd v. Quistclose Investments Ltd. It is a concept recognised by law that when money is advanced by a client to a person or a company—the payee—to be used for a specific purpose, in this instance gambling, if that purpose cannot be fulfilled a trust is created in favour of the customer.
In the event of the business collapsing, money is refundable, and there is an obligation on banks holding the funds not to remit them to administrators, liquidators or receivers. It is seen in the industry as a low-cost solution. The operators do not still retain control of the money but when it comes to insolvency, customers are protected. In cases of fraud, we have to take care that we do not introduce a sledgehammer to crack a nut. As the Maxwell and countless other cases proved, all sorts of institutional arrangements can be put in place but a determined thief will steal the money.
On proposed new clause 12, I would like to ask the Minister whether she believes that as a minimum the industry operators licensed here should be required to set up a quistclose trust arrangement. My answer would be yes. I would also want to see enhanced disclosure, so that the terms are on the face of what people sign rather than in the small print.

Jim Shannon: I want to put forward a few points on proposed new clause 9. I support the clause as far as it goes but I wish it went further. Problem gambling is a very real issue, a profoundly destructive process that can result in all manner of difficulties for those concerned.
I was interested in the exchange between the hon. Member for Rochford and Southend East and the shadow Minister on the subject of alcohol. Over the years I have found that the people who beat alcohol, if that is ever possible, are those who acknowledge they have a problem. If someone acknowledges they have a problem, they need help. The purpose of the new clause is to acknowledge the problem and give help to those who need it. Self-regulation is one way to do just that.
As the hon. Member for Bradford South said, the problem prevalence for the UK is 0.9%. That sounds small and the kind of thing we do not seem to worry about. In itself it might cause some concern but imply that that is not a worry and is okay. However, that 0.9% is 450,000 people.

Gerry Sutcliffe: I did not want to give the impression that nobody should care about the 0.9% because, as the hon. Gentleman says, that is quite a significant figure. The hon. Gentleman relates gambling to alcohol. Alcohol treatment is paid for by the NHS, while gambling addiction is not. Perhaps there is a need for the Government to look at what they can do to help the industry pay for treatment for people with gambling addiction.

Jim Shannon: I thank the hon. Gentleman for his intervention. I never felt he disregarded the 0.9%; that was not at issue. His valuable intervention raised the good point that there is a sickness and illness and help is needed. That is something that we need to look at.
We must realise that, since no man or woman is an island, the families of those affected can be devastated. The figure for those negatively affected by gambling is even greater. I read a report in one of the papers the other week about a parliamentary answer that referred to an east London constituency in an area of high welfare dependency. In 2011, £243,270,300 was staked in that east London constituency’s 164 high-stakes machines. Such areas are home to problem gamblers and vulnerable people, and they are the very people who are greatly affected, and new clause 9 would address their needs. The article quoted the hon. Member for Chatham and Aylesford (Tracey Crouch), who is a very impressive MP, and Liverpool city council. The 559 sites across Liverpool took in £607 million,
“equivalent to £1,302 for every man, woman and child.”
That is part of the problem that we are trying to address for problem gamblers and vulnerable people.
I will try to put that in some kind of context for the Minister, who I know is deeply and profoundly concerned about the misery associated with human trafficking, which is a vile trade. Fewer than 2,000 people were referred through the national referral mechanism last year as victims of trafficking. I am not suggesting that the sufferings of people with problem gambling are the same as those of people who have been trafficked—the two situations are clearly very different. The sense in which the latter group has been deprived of its liberty by a third party differs significantly from the way in which the former group has suffered as a result of addiction. When we are rightly thinking about creating a modern slavery Bill to address one form of suffering, however, it is worth being aware of another form of suffering that appears to affect many more lives, especially as the Bill before us today is able to do something about it. We have the chance to make a change that addresses problem gamblers and the regulation of gambling.
My concern is that the difficulties of problem gamblers are greatly compounded by the lack of progress in their treatment in recent years. How long did the Gambling Commission, the industry and the bodies that it has set up take to commission and fund education, research and treatment for problem gambling? It has been eight years and only now can the head of the Gambling Commission say that research is gaining momentum. During oral evidence, Jenny Williams, while admitting that she is frustrated by the slow progress, seemed to take pride that the Responsible Gambling Trust has recently announced a big harm-minimisation conference for December 2013, which as we all know is long overdue. She conceded that she is frustrated, which is an appropriate and under-rated word, about the slow progress on research.
Since the passage of the Gambling Act 2005, it took the industry and the Gambling Commission more than eight years to announce a harm-minimisation conference of global import. In August 2012, seven years after the passage of the Act, the Gambling Commission, the Responsible Gambling Trust and the Responsible Gambling Strategy Board published a statement of intent titled “New arrangements for prioritising, commissioning, funding and evaluating research, education and treatment.” The previous arrangement had apparently been agreed in 2008, three years after the passage of the Act, but as the “new arrangements” document concedes, only in 2011 was it
“agreed by all parties that those arrangements were not working”.
What a waste of time and resources not to do anything.
In the meantime, we have seen an increase in problem gambling—admittedly it is a small increase, but it is an increase nevertheless. What have the Government done in response? They scrapped the national problem gambling survey. We have folded the national lottery into the responsibilities of the Gambling Commission and have seen that the industry can ask successive Governments to increase the stakes and prizes of gaming machines through the triennial review process and get what it wants.
The challenge of addressing problem gambling is even more pronounced because the 2010 problem prevalence figure for online gambling, the focus of the Bill before us today, is much higher than for gambling on average. The annual online slots problem prevalence figure is more than 9%, and the monthly figure is 17%.
That was the situation before the introduction of the Bill, the effect of which will be to make the people of the United Kingdom, including problem gamblers, more aware of online gambling opportunities because of the changes to advertising. One of the main tools to protect those who have a problem is self-exclusion. The logic is quite simple, and the Minister, in her correspondence and in her answers to questions, has indicated that she leans towards self-exclusion. As with other forms of addiction, people have good days and bad days—days when they are stronger to resist and days when they are not. Self-exclusion provides a mechanism whereby, on a strong day, problem gamblers can self-exclude from gambling providers. They acknowledge that there is a problem and do something about it. The current way that self-exclusion works provides a credible solution with respect to terrestrial gambling. It is not physically impossible to self-exclude from the four betting shops in your town and to have then self-excluded from all terrestrial gambling opportunities where you live. However, that cannot be said of online gambling, where you can self-exclude from four sites and still have access to hundreds, indeed if not thousands, of sites.
It simply is not possible to self-exclude from any more than a tiny, tiny fraction of those sites. Thus we have to confront the fact that we are not currently affording online gamblers the same kinds of protection afforded against terrestrial gambling. In this context is it any wonder that the problem-gambling prevalence figures are worse for those gambling online? Quite apart from anything else, to provide terrestrial gamblers a credible form of self-exclusion but to deny it to online gamblers seems to me to be rather discriminatory. I hope the Minister can respond to that.
Mindful of these concerns, I contend that even without the changes that this Bill proposes in relation to the advertising of online gambling, we urgently need to introduce an online gambling one-stop shop for self-exclusion. The shadow Minister made that point very clearly in his earlier presentation. Not to do so would be to ignore the findings of the prevalence survey and to discriminate against the needs of online gamblers.
The imperative for this change, however, is radically compounded by the Bill. Some would have us believe that this Bill is all about tax. The Government, however, have rightly made it clear that it is actually about consumer protection. I am delighted to hear of this commitment from Government. It is a step in the right direction. If this suggestion is to have any credibility, however, the fact that the Bill proposes to allow a new group of online gambling providers—namely those currently operating in what is now a blacklisted jurisdiction—to advertise under licence must be complemented by a provision to enable people to access a one-stop shop for self-exclusion. It simply is not credible to say on the one hand that this Bill is about consumer protection and then on the other to permit more gambling advertising, making problem gamblers in the UK more aware of online gambling opportunities and to do nothing new to help online gamblers. Indeed, I find it extraordinary that the Bill effectively liberalises gambling advertising but does nothing new to help online gamblers, whose needs are already overlooked compared to those of terrestrial problem gamblers. If there ever was a case of the king with no clothes, this is that story. The Government's problems are further compounded by the fact that the Bill does nothing to prevent those who do not get a licence from continuing to access the UK market, but we will address that issue, Mr Williams, in new clause 6 and new clause 7.
The idea of a one-stop shop for self-exclusion is supported both by gamblers themselves and by academia. When we held our evidence sessions last week, it seemed that the industry was keen to see it happen and it seemed that Government were also keen to see it happen. There is an opportunity to do that.
In a survey conducted by the university of Salford, 69% agreed that
“self-exclusion is ineffective since players can simply choose to play at another site.”
Even stronger, 72% agreed:
“For self-exclusion to work all sites need to co-operate to have an industry-wide self-exclusion system.”
Dr Sally Gainsbury, to whom the shadow Minister referred, also gave her figures and comments on this. She argued that the technology is available and points to its feasibility, particularly in the UK, due to the current existing licensing conditions and the code of conduct upheld by the UK Gambling Commission. The shadow Minister also referred to Veriplay and Bet Buddy. Again, research presented to the Canadian-based Responsible Gambling Council in 2011, by the British-based GamCare, the university of Salford and Bet Buddy also endorses the proposal, as so eloquently put forward by the shadow Minister.
I support new clause 9 in as far as it goes but I would like to see a clear requirement placed on the face of this Bill requiring the Gambling Commission to introduce a one-stop shop mechanism to which all holders of UK licences must be subject. The shadow Minister has indicated that this is a probing proposal, I think that is what he said. [Interruption.]Sorry, that is not what he said. I am keen to support this new clause 9 and if he presses it to a vote, I support him on it, but I would be keen to hear comment from the Minister. Without this provision, and indeed without financial transaction blocking which we will discuss shortly, the notion that this Bill is about consumer protection will, I am afraid, seem incredible.
I implore the Minister to give us an undertaking today to review the fact that the Bill will make problem gamblers more aware of online gambling opportunities without affording them the key protection that they need: a credible self-exclusion mechanism. I also implore her to table an amendment to the Gambling Act 2005 on Report to require the Gambling Commission to make one-stop-shop self-exclusion for online gambling providers, as distinct from simple self-exclusion, a part of the licence agreement of any operator with a UK licence.

Gerry Sutcliffe: The hon. Gentleman has prompted me to make a contribution on problem gambling and what to do about it. He quite rightly criticised the industry for being slow to bring forward its contributions to the voluntary levy that was eventually put in place to get them to react to the problems in the sector. I am pleased that many of the larger companies are now contributing, but there are still some that are not contributing.
I explained earlier that I am a trustee of the Responsibility in Gambling Trust. The problem is that some companies do not contribute towards that trust, or towards research, education and treatment. Given the size of Camelot’s organisation and the amount of money that is gambled on the national lottery, its contribution could be greater.
I would like to understand something from the Minister. I do not understand why the Government cancelled the prevalence study, because it was a good measure of what was taking place in the sector. Will she also comment on what we need to do to raise gambling addiction as an issue in the health service? As I said earlier, there is no national health funding for gambling addiction, unlike other forms of addiction. Usually, people who have a gambling problem have other problems as well, for example alcoholism.
There is now an opportunity for the Government to work with the sector to remind it that everyone should contribute to the voluntary levy and to talk to the health service about what we can do about the evidence that is coming forward. Many problems in the past have been that people have associated things with gambling addiction when that was not the core issue. Hon. Members will see the Bill as an opportunity to try to get some positive reaction from the Government about gambling addiction and what needs to be done.

Helen Grant: It is a pleasure to serve under your chairmanship, Mr Williams. I thank the hon. Gentleman for his suggestions on protecting players.
New clause 3 would end the voluntary approach to operator contributions for research, education and treatment into problem gambling and make them compulsory for all operators licensed by the Gambling Commission. Currently, Gambling Commission licensees are required to have effective policies and procedures in place in relation to socially responsible gambling, which must include a commitment to how they will contribute to the research, education and treatment of problem gambling. After the enactment of the Bill, all British-facing operators will have to demonstrate how they will meet those Gambling Commission requirements.
The current voluntary arrangements were only recently revised in 2012. The revised arrangements follow a review led by the Gambling Commission, which concluded that enhanced voluntary arrangements were likely to be effective in ensuring that industry funding is firmly committed, sufficient and sustainable. I am satisfied that the arrangements are working, and we have no plans to review them again at this stage. I will, of course, continue to monitor the effectiveness of the voluntary arrangements. I am aware of what the hon. Member for Bradford South has said about some contributors’ ability to pay considerably more.
On new clause 5, I fully understand and share the concern of the hon. Member for Eltham about the possible use of social media by gambling operators to attract new players to real gambling. I am also concerned, as he is, by the possible impact on under-age users of social media who may become habituated to gambling-like activities and may start to pay, in effect, for more time by buying more chips, spins or other credits, or be tempted to real-money gambling as soon as they are able. However, the new clause is not needed. Not only does the Secretary of State already have the power to conduct a review, but the Gambling Commission has already started the process. It commissioned and published a review of what is known of the potential risks from social gambling on social media and has been working with the responsible gambling strategy board and providers of social gaming. That approach should help us to decide whether there are elements of social gaming that need to be addressed by either the Government or the regulator.
The shadow Minister referred to new clause 9 in some detail, as did the hon. Member for Strangford, who I know is interested in problem gambling. I believe he raised the issue on Second Reading and in the Committee’s evidence sessions. The new clause would enshrine in statute a one-off commitment to consult on a standardised system of self-exclusion. Self-exclusion is a priority area for the RGSB and it is working closely with the Gambling Commission to improve the effectiveness of self-exclusion as a harm minimisation tool.
Although we expect operators to take all reasonable steps to enforce exclusions, there is of course an onus on the individual to comply with their exclusion. I welcome recent commitments from the industry to explore and develop more comprehensive self-exclusion arrangements, and I expect the industry to make rapid progress in delivering on its commitments.

Clive Efford: I would like to hear from the Minister what she is saying to the Gambling Commission and others about self-exclusion and about what we expect as Parliament, the final arbiters of what regulation should and should not do. What is she saying to them about a one-stop shop for self-exclusion across the remote gambling industry? It is an important issue, because the current arrangements are just too easy for people to bypass. We heard from Mr Boucher, who said that on a good day, a problem gambler can self-exclude, but on a bad day when the demons are with them, they can get around the system too easily. It is those people who we need to protect with the one-stop shop. What is the Minister saying to people about how we address that problem?

Helen Grant: It is a very serious area of concern. The industry is motivated to work closely on it, the Gambling Commission is working with the industry and I am working with the Gambling Commission. I will say a little more on self-exclusion in a moment, but I think we need to let processes take their course. It is not straightforward and it is not going to go away, but it is not off my radar. We will continue to monitor and check to see whether we can make further progress, but I do not want to act too hastily and make an error or mistake, or to make something worse than it currently is.

Clive Efford: I fully accept that last comment, which is why the new clause is drafted so as to require the Secretary of State to go away and consult about an appropriate way forward. I accept that we cannot set the detail on this issue today. However, the question is whether the Minister is saying that there will be a self-exclusion system that covers the industry. Will there be a one-stop shop so that when people self-exclude, they will self-exclude as far and wide as the Gambling Commission can achieve, or is the Minister saying that she will wait to see what is said, and then we will see what we can do? There is a big difference between those two positions.

Helen Grant: No; I am saying that the industry is motivated and very much aware of the fact that it needs to do something about this issue. The Gambling Commission is aware that we need constantly to improve the current systems. As the Minister responsible I am of course watching everything carefully. I will do everything I can—in the right way, of course—to make the situation better than it currently is. I am going to say a little more about self-exclusion when I respond to detailed queries.

Clive Efford: I hope that the Minister will permit me to intervene later.

Helen Grant: Of course.
New clause 12 requires the Secretary of State to conduct a review comparing the UK regulatory regime with that of various other jurisdictions. I am confident that the British regulatory system is a model of best practice, which will be enhanced by the new Bill. Should the Secretary of State or I decide to conduct such a review, it will not require primary legislation.
I will now deal with some of the many matters raised by individual Members. First, the shadow Minister referred to Dan Boucher and also commented sincerely on the importance of ensuring that we have the highest possible standards. I recall what Mr Boucher said about that in his evidence, which was that
“we should review the protections provided by white list jurisdictions”
and that
“our protections are not as good as theirs”.

––[Official Report, Gambling (Licensing and Advertising) Public Bill Committee, 12 November 2013; c. 37, Q90.]
It will probably not surprise the shadow Minister to hear that I disagree with Mr Boucher completely: other regulators are not the issue.
Together, the licensing conditions, the codes of practice and the remote gambling software technical standards, which have been referred to, ensure that the Gambling Commission regulates robustly and effectively.
That is what the Bill is all about: robust and consistent protection of British consumers. In fact, Gibraltar’s code of practice on remote gambling and software technical standards largely mirrors the technical standards of the Gambling Commission. The commission already disseminates best practice, and that includes engaging with overseas regulators. As I am sure the shadow Minister is aware, it hosts numerous visits every year from overseas regulators who are keen to learn from exactly what it is doing.
On the separate review of the Gambling Commission code, which the shadow Minister mentioned, the commission is consulting—this has come out of Committee —on the changes to its licence conditions and codes of practice in preparation for the new regulatory regime. The consultation closes on 4 December and changes will be implemented in 2014.
The shadow Minister also talked about social gaming in some detail. The Government are aware, of course, of the potential risks posed by gambling-style social gaming, especially to children and young and vulnerable people. We have been working with the Gambling Commission to look at the related evidence around consumer protection and problem gambling. The commission is working with the International Social Games Association to develop a body of evidence to assess the potential impact and risks. In the meantime, the Office of Fair Trading is consulting on principles for consumer protection on online, app-based games. The principles are designed to enhance consumer protection across all online and app-based gaming, including gambling-style games. We continue to monitor developments in the area and I assure the shadow Minister and other members of the Committee that there is absolutely no complacency.
I hope that I have made my position on self-exclusion clear. [Interruption.] The shadow Minister is shaking his head, but the industry is committing to self-exclusion. Yes, of course there is more work to be done, but we want the industry to do it, to take the lead and to believe in what it is doing and why it is doing it. We would also like the industry to move very rapidly and as the Minister, perhaps I can encourage it to do so. I want the industry to monitor effectiveness, and I will encourage it to do that as well.

Clive Efford: I am afraid that the Minister has not reassured me. She seems to be saying that we are waiting for the industry to tell us what it will do. [ Interruption. ] It is usual not to permit an intervention on an intervention, but we can make it up as we go along if she wants. I am free and easy, so I will give way.

Helen Grant: I thank the shadow Minister. To clarify, we are not waiting for the industry to tell us what it will do; the industry has started acting and is doing things. My position is that I want it to move a little quicker, and I will encourage it do so. I want to monitor the effectiveness of what is done, but it is not a matter of waiting; it is a matter of allowing the industry to get on with what it has started.

Clive Efford: What is the Minister expecting the industry to do? All we are asking for with the new clause is a commitment towards a single one-stop shop across the industry. Does the Minister not accept that, if that is not achieved, the measure on the internet and remote gambling will not be effective? We need a commitment that we expect whatever the industry comes back with to be a one-stop shop that ensures that when someone self-excludes, they self-exclude across all the licensed operators under the Gambling Commission.

Helen Grant: It is a complicated area, which touches on many—

Clive Efford: Is that a no?

Helen Grant: No, it is not a no; if it was a no, I would say no. It is a complicated area. We want the best possible protection, but we need to let the Gambling Commission continue to work with the industry. If I am not satisfied that we are getting the result that we want, I will take appropriate action. I like to think that I could work with the shadow Minister and others in relation to that.

Jim Shannon: I do not think we are all that far removed from agreement. The Minister is confirming that, if the gambling industry does not meet a satisfactory target, she will intervene and pursue better regulation. I think that that is the gist of what she has said. Can she confirm that?

Helen Grant: Of course I want to see progress, and I believe we can make improvements from where we are now. I will be encouraging the changes and I will monitor carefully what the industry is doing and how effective its ideas are.
The hon. Member for Newcastle-under-Lyme referred to new clause 12. I hope he will agree that the British regulatory regime is a model of best practice. There are, however, emerging jurisdictions in EEA countries with less experience of regulation. The Bill will remove uncertainties about robustness of regulation and ensure the consistency that is certainly needed. We are happy to keep talking to other regulators and we will of course share best practice.
The Gambling Commission is internationally respected and its job is to ensure that the British regulatory system is the best that it can be. It is its job to advise me if changes need to be made. If so, I will endeavour to make those changes.
The hon. Member for Newcastle-under-Lyme also touched on the issue of disclosure of customer accounts. Again, that is a complicated matter. I will have to write to him on that.
Finally, the hon. Gentleman raised the issue of quistclose trusts. I do not want to pre-empt the Gambling Commission’s consultation, which he mentioned. The commission is looking at quistclose trusts. There are advantages in such a scheme, but also risks, so it is right that we wait for the consultation. I am sure he will have some input into the consultation, which does not close until early December.
I hope I have made it clear that I wholeheartedly support consumer protection, which is the object of the Bill. However, I do not believe that the Bill is the appropriate vehicle to take forward the additional proposals. The Bill is a sensible step to ensure that Britain maintains a well respected gambling environment to allow consumers to play safely and with confidence while allowing the industry to continue to grow.

Clive Efford: It has been quite a long debate on this group of new clauses. I hear what the Minister says about the revised levy that was agreed in 2013. I will not press new clause 3 to a vote, but I think we might return to the issue. We want to probe how effective the scheme might be when new operators come under the system and whether they will be part of it and contributing to it. As we have heard in some of the evidence, people coming into our licensing regime should be contributing to research and treatment, even though they might be located offshore.
On new clause 5, I am delighted that the Gambling Commission is holding a review and a consultation. I look forward to seeing the results. On new clause 12, we will want to see how effective the commission’s new code is. It is being consulted on, which reassures me, but we want to ensure that high standards are set, as we have said consistently in our discussion of the Bill today. I am sure that that is supported by all Members.
On new clause 9, I am afraid that the Minister did not convince me. I pressed her several times for a commitment on whether she would be satisfied with an exclusion system that was not universal and covered the whole remote gambling industry. If people who are not capable of controlling their gambling addiction do not self-exclude, the opportunities in the privacy of their own home to go and gamble somewhere else are virtually limitless. What we were after from the Minister was a clear statement that if the industry does not come back with a universal, one-stop shop self-exclusion system, she would not be satisfied, but she did not say that. I have given her the opportunity to intervene, to use that exact phrase and to give that specific commitment, because we should not require anything less of the industry. The technology is available, as is the means to monitor people’s activities, and we should not miss this opportunity. I will therefore press new clause 9 to a Division at the appropriate point.
I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

New Clause 4  - Reporting of suspicious activities and power to obtain financial information

‘In order to promote consistency of sports betting regulation, regulation of remotely conducted spread betting and therefore of all spread betting shall be transferred from the Financial Conduct Authority to the Gambling Commission, which shall thereupon—
(a) have power to require and obtain from its licensees including spread betting organisations information concerning actual or potential suspicious activities in relation to sporting events, and to share such information with the relevant sports governing body;
(b) have power to require and obtain information on financial transactions by licensees which it reasonably suspects might be germane to the investigation of suspicious betting activity, money laundering or other criminal activities, or the protection of vulnerable individuals.’.—(Clive Efford.)

Brought up, and read the First time.

Question put, That the clause be read a Second time.

The Committee divided: Ayes 7, Noes 9.

Question accordingly negatived.

New Clause 6  - Enforcement by IP blocking

‘The Secretary of State shall have power to make regulations, in the form of a statutory instrument to be laid before and approved by both Houses of Parliament, permitting the Gambling Commission to block the internet access and internet protocol addresses of any licensed remote gambling operator which is found by the Gambling Commission to be in breach of its licence.’.—(Clive Efford.)

Brought up, and read the First time.

Clive Efford: I beg to move, That the clause be read a Second time.

Hywel Williams: With this it will be convenient to discuss the following:
New clause 7—Enforcement by financial blocking—
‘The Secretary of State shall have power to make regulations, in the form of a statutory instrument to be laid before and approved by both Houses of Parliament, permitting the Gambling Commission to—
(a) block the bank accounts of any licensed remote gambling operator found by the Gambling Commission to be in breach of its licence; and
(b) intervene in financial transactions between licensed remote gambling operators and certain customers in order to prevent certain customers such as problem gamblers from continuing to use the services offered by the operator, including by way of intervention to block certain credit cards and other means of payment.’.
New clause 8—Consultation on existing use of financial blocking and IP address blocking—
‘The Secretary of State shall procure a process to take place expeditiously whereby each of the current gambling regulatory bodies share information on their financial transaction blocking and IP address blocking powers and activities, and share and implement best practice.’.
New clause 10—Jurisdiction and enforceability of remote gaming contracts—
‘(1) Any contract between a person providing facilities for remote gambling which are used in the United Kingdom and the user of those facilities shall be deemed to be concluded in, and under the laws of, that part of the United Kingdom where those facilities are used.
(2) Section 335(1) of the Gambling Act 2005 shall apply to any contract between a person providing facilities for remote gambling which are used in the United Kingdom and the user of those facilities, irrespective of whether that contract is enforceable in the country or place in which the provider of those facilities is located.’.
New clause 11—Dormant accounts—
‘(1) The Secretary of State shall consult on appropriate ways to require licensed remote gambling operators to disclose (as a condition of their licence) the amounts held by them by way of—
(a) winnings of UK customers unclaimed for a period of more than one calendar year; and
(b) sums in dormant accounts of UK customers.
(2) A dormant account shall for this purpose be an account which has been inactive for at least one calendar year.’.

Clive Efford: New clauses 6 and 7 relate to internet and financial blocking. New clause 8 proposes consultation on how that might be achieved, because there has been some discussion of whether such blocking is appropriate—it is certainly technically possible, but is it the most efficient means of enforcement? Similar to an earlier amendment on spread betting, new clause 10 is about jurisdiction. What people licensed by the Gambling Commission do in other jurisdictions should be taken into consideration to determine whether those people are fit and proper. I will not go over that again, because the argument is similar.
New clause 11 is about dormant accounts. Here is an opportunity to require all new licensees and, through other measures, existing licensees to notify the Gambling Commission of all moneys that they hold in dormant accounts or unclaimed winnings. There are several million pounds in such accounts, and I believe we should ensure that that money goes back into treatment and research. Perhaps we could pool those resources and put them back into support, but before we can even consider that, we need to know what is there, and the Bill is an opportunity for us to think about that.
Regarding internet and financial blocking, we had some questions and answers on that last week in our evidence session. Jenny Williams said:
“Ofcom did a big report, with which I am sure you are familiar”—
I was not, but I am now—
“on the difficulties of ISP or URL blocking and came to the conclusion that it is not cost-effective on the whole. You heard from the witnesses this morning that it is not that effective. It can be a disruption tool. Our colleagues in Italy, Norway and around the world, with whom we have discussed the virtues or lack thereof a great deal, say that it is very labour-intensive and disruptive but not that effective. The general view that we and Ofcom came to is that if you have a good open market with a wide range of products and other ways of tackling the illegal market, it is a totally disproportionate use of resources and can have a lot of unforeseen effects. You can over-block or block legitimate businesses. At this stage, therefore, it is not thought to be a sensible thing to embark upon.”––[Official Report, Gambling (Licensing and Advertising) Public Bill Committee, 12 November 2013; c. 57-58, Q61.]
I went and had a look at Ofcom’s report, entitled “‘Site Blocking’ to reduce online copyright infringement”. It looked at a variety of techniques used to block access to sites, including internet protocol blocking, which is modifying internet service provider network equipment to discard internet traffic destined for a blocked site; domain name system alteration, which is changing the ISP service that translates domain names into IP addresses, so that the user is told that the site does not exist or is directed to an informational page; URL blocking, which is the blocking of specific items, such as web sites or addresses—ISPs already block URLs supplied by the Internet Watch Foundation—and packet inspection, which is blocking techniques that examine network traffic either at a high level, called shallow packet inspection, or a more detailed level, which is deep packet inspection.
The report looked at the effectiveness of each system as well as hybrid combinations. It found that
“none of these techniques is 100% effective”,
but recognised that
“site blocking could contribute to an overall reduction in online copyright infringement”.
It rightly recognises the difficulty of preventing circumvention by more determined users, but does not rule out the use of blocking as a wider part of tackling online copyright infringement; it states that
“site blocking could still play an important role in helping to tackle online copyright infringement.”
Ofcom did not conclude that site blocking was not a suitable method of blocking. It was trying to block someone from infringing copyright. Here we are talking about someone going to a clearly identified site where the regulator has identified illegal or irregular activity. As the report also points out:
“Just because it is technically possible for site operators and end users to circumvent blocking, it does not mean that in practice they will universally do so.”
We should also consider the fact that the report was looking predominantly at copyright infringement. That is an illegal activity, whereas gambling is not. A user looking to breach copyright might be more likely to circumvent the rules than one looking for a place to bet. Putting a block or notice on a site could also help to prevent users from accessing unlicensed sites when it is their intention not to do so.
As the Ofcom report recognised, copyright infringement measures are more effective when part of
“a wider mix of measures, such as education”.
Combining measures on ISP blocking with public awareness campaigns about kitemarks and Gambling Commission regulation would assist in preventing a black market. This is a consumer protection issue: why would we not want to have these protections at hand? Why make it easier for an illicit market to develop?
Similarly, with financial transaction blocking it seems that enforcement has been dismissed too quickly. As was pointed out during our evidence sessions last week, in a mature, open market, financial transaction blocking can be effective. I will quote Dan Boucher:
“I have heard some references to the effect that its results are mixed; I would like to suggest that in a mature and open market financial transaction blocking is very effective.”––[Official Report, Gambling (Licensing and Advertising) Public Bill Committee, 12 November 2013; c. 36, Q89.]
That is the key point. Our market is an attractive one and a lot of people will want to operate in it. A lot of benefits can be gained from being part of that legal market, so in that sense it will be a self-regulating market. That type of blocking of transactions could be something that the industry would welcome.
There was wide support for enforcement measures, including from sports groups. Nic Coward, the general secretary of the Premier League and former chairman of the Sports Rights Owners Coalition, told us in evidence:
“We therefore want there to be an effective enforcement regime so that the regulated community—the operators—know that there are serious issues that must be dealt with, and that if they are not dealt with, there will be consequences.”––[Official Report, Gambling (Licensing and Advertising) Public Bill Committee, 12 November 2013; c. 7, Q3.]
Gareth Wallace of the Salvation Army said:
“We certainly agree that ISP blocking would be extremely valuable.”
Dan Boucher said:
“Mindful of that, the failure of any enforcement mechanism in the Bill is of real concern...The Bill will tighten up consumer protection only if it does two things: first, it should insist that those who can advertise get a licence, but secondly it should prohibit those who do not have a licence from accessing the UK market. Financial transaction blocking is probably the most effective way of addressing that.”––[Official Report, Gambling (Licensing and Advertising) Public Bill Committee, 12 November 2013; c. 35-36, Q89.]
As I have already said, he went on to stress the effectiveness of financial transaction blocking in a mature and open market.
There are risks that operators will try to circumvent our measures, but that is no reason to turn our backs on the opportunity the Bill gives. If the Minister will not accept new clause 6 or new clause 7 being added to the Bill, I urge her at least to consider new clause 8 and to consult on the potential for financial transaction blocking and IP address blocking. We are being told by regulators that it would not be effective, but the Ofcom report certainly did not conclude that blocking was not worthwhile; in fact it concluded that blocking could work if it was part of a basket of measures such as we would have in an advanced licensing system, including kitemarking and links to advice, along with proactive investigation to identify irregular activity and check up on operators that might not be doing enough to identify problem gambling habits.
As for the issue of unintended consequences of blocking sites, that would in fact be a reason for the industry to try to be clean and to play its part in identifying irregular activity that might result in blocking that impinged on the activities of the industry itself.
So I would err in favour of stronger enforcement action, rather than being cautious because of the possibility of unintended consequences. On balance, the conclusion of the Ofcom report is that that is a risk worth taking. Therefore, we are not dismissive of this as an effective measure. I think we should be looking very seriously at this.
As for new clause 10, I think we should give every power we possibly can to the Gambling Commission. If one of their licensed operators is operating somewhere else and they are found to be in serious breach of one of the licence conditions here—for instance not reporting on suspicious activity—the Gambling Commission should say, “We are not going to put up with that, that was quite a serious breach,” and it would have the power to revoke a licence. We are not saying it must revoke the licence; we are saying it should have the right to consider that. I think that power would have a weight of influence over the activities of some companies elsewhere which would be of benefit to the wider industry in preventing some of the more illegal elements about which we are concerned.
On dormant accounts, we had the report from the right hon. Member for Bath on the subject in 2010. The Government have said that after this Bill is passed, they will legislate to deal with dormant accounts and unclaimed winnings. In my opinion it should be part of the conditions under which people are licensed that they have to report that money from day one. This is an opportunity to deal with that. I know that the Minister is going to say that she has powers to do that under the Gambling Act but that has not happened. We have to wonder why.
This is important. I do not think this money should just be left there; it has not been earned by the industry and could be put to good work. Admittedly an element of the money would have to be retained by the industry because if people turn up and claim that money it has to have a reserve to be able to pay out. However, this is an opportunity for that money to perhaps go into protecting the integrity of sport. It could go into research. It could go into developing new forms of treatment. The bulk of it could perhaps be reinvested in grass-roots sport. Who knows where it could go, if we were to identify this sum of money. I would urge the Minister to act on this. I am interested to hear her comments on dormant accounts.

Gerry Sutcliffe: I note what my hon. Friend says about new clause 11 on dormant accounts. This issue has been with us for many years. The right hon. Member for Bath (Mr Foster) produced a report in 2010 that highlighted that there were millions of pounds available in such accounts. We tried to get a voluntary arrangement with the industry at the time to release this money.
The Government must be consistent in this case and follow what they have done with dormant bank accounts, and with the national lottery regulations—if prizes are not claimed over a period of time, the money goes back into good causes. The Bill presents a great opportunity to put this wrong right and, as my hon. Friend the Member for Eltham has suggested, the money could be spent on research, education, treatment and grass-roots sport. That money is there, available now and should be used.
As I say, we could not reach a voluntary arrangement with the industry and I think the Government are going to have to act. The difficulty is that the Government will say, “We will look at it again, we will not tag it to this Bill.” However, we are unlikely to have another gambling Bill this side of a general election, which means it will be another two years before we can get to this money which could be used for sport and other things. I hope that the Minister can take this proposal away and look at it. Drafting the required clause is not a significant job and although her officials may tell her that it is too hard, it is in a box that says: “It can be done”. The officials might not want to do it, but it can be done and should be done.

Jim Shannon: I want to speak on new clauses 6 and 7 and echo the words of the shadow Minister. We were unhappy that new clause 9 did not succeed, but we are ever hopeful that the Minister may consider it at a later stage and tighten the legislation when it comes to self-regulation. As I explained in my previous speech, progress in relation to protecting problem gamblers has been very slow. When we finally have a Bill that claims to be about player protection—after, if I am counting correctly, four Ministers and about six years—it proposes to liberalise advertising and allow more companies to enter the market.
We are told by the Gambling Commission that it has the tools it needs for enforcement; that it can prosecute owners of gambling websites that offer their services to UK citizens without an appropriate licence. This is as untested as the other forms of enforcement because to date the Gambling Commission has not had the powers to prosecute firms without a licence unless they had equipment in the UK. These powers have also remained untested until now. So even though the principle is that we need evidence-based legislation, we get a Bill that works on the assumption that the Gambling Commission has the powers to prosecute, but we do not know when or how it will and or how successful it will be if it decides to prosecute. That is the crux of the matter.
Moreover, when it comes to enforcement it is also a surprise to note that the highest penalty in the Gambling Act for providing an illegal venue for gambling is a 51-week prison sentence. I mention this because the Treasury consultation on how to implement the enforcement of taxation on a point of consumption basis mentioned a maximum sentence of seven years’ imprisonment for tax avoidance. I think hon. Members will agree that this is a somewhat higher sentence than 51 weeks. It also shows that the Treasury means business and that has to be applauded. That is why I support the provisions of new clauses 6 and 7. However, I would like to see enforcement in place by IP blocking and financial blocking before this Bill takes effect. It would be more effective if that was the case. That is why it would be better to have the wording in the Bill, rather than the measure be treated as delegated powers to be brought forward as secondary legislation.
On both of these new clauses, I remind hon. Members that while they do not have a 100% success rate abroad, they are likely to work well in this country. We have a mature and open gambling market where less blocking is necessary and where there is less incentive to go to illegal sites, because the odds on offer are in any event competitive. Moreover, if they do not manage to block every transaction, the mechanisms are still very useful both as deterrents and as educational tools. That is helpful.
As deterrents, the terms of the new clauses would provide enough of an incentive for a firm to apply for a gambling licence, rather than try to circumvent the blocks. As an educational tool, the blocks could be set up in such a way that ISPs or financial institutions notify customers that they are about to enter into a transaction with a company that does not hold a UK gambling licence. In a mature and open market, this should offer enough of an incentive to seek financially secure and socially responsible gambling.
Even if the technology can be circumvented, let us not make the unobtainable goal of 100% transaction blocking the enemy of every significant success that is and can be obtainable. On new clause 6 specifically, I am curious why it does not include IP blocking for a company that never applied for a licence. Perhaps the Minister would say whether this anomaly could be addressed at a later stage. I look forward to her response.
Belgium, Denmark, Estonia, France, Germany, Israel, Italy and Slovenia are some of the western countries said to use IP blocking. Why can we not join them? This seems to be something that we could do together and do well. On new clause 7, I have similar questions. Why block financial transactions to companies that are in breach of their licence, but not companies that never applied for a licence in the first place? Surely we should be blocking illegal gambling sites and those that break their licensing conditions. I presume that that is the issue; if it is not, it certainly should be. I appreciate subsection (b), which the Gambling Commission could use to develop a one-stop shop for self-exclusion without the need for the industry to be involved. Although that is a good step forward, the industry should be involved. I would like to see an additional provision that instructs the Gambling Commission to develop, as part of the licensing codes and conditions of practice, a requirement on the industry to facilitate a one-stop shop for self-exclusion.
I applaud the Government for introducing the Bill in principle, but I am profoundly concerned that although it is supposed to provide better regulation and consumer protection, in practice it is likely to leave problem gamblers in a much more vulnerable position. That could be put right by the introduction of financial transaction or IP blocking and the introduction of a one-stop shop for self-exclusion from online gambling. To that end, I welcome the new clauses, but I wish that they went further. I implore the Government to think again, and I ask the Minister to consider tabling Government amendments on Report to introduce the measures I have outlined. If I may, I will borrow some of her words and change them slightly: problem gambling “is a scourge. It does not discriminate and permeates across age, race, sex and gender; it crushes self confidence and destroys lives.” For the sake of those things, we should be a society that does more and does it better.

Helen Grant: I thank the hon. Gentleman for his suggestions on enforcement, which include IP and financial transaction blocking, and on dormant betting accounts. New clauses 6 and 7 would give the Secretary of State powers to permit the Gambling Commission to introduce financial and IP blocking. New clause 8 would make a commitment to require gambling regulators to share information on financial and IP blocking, and to share best practice.
I share the concerns that the Bill should be enforceable, and I believe that it is. As we have heard, there is mixed evidence about the effectiveness of IP and financial transaction blocking. I will remind members of the Committee of what some of the knowledgeable witnesses who gave up their time to give evidence said about IP and financial transaction blocking. Mr Clive Hawkswood, CEO of the Remote Gambling Association, said:
“our experience in lots of other jurisdictions is that they are not wildly successful.”
Peter Howitt, CEO of the Gibraltar Betting and Gaming Association, said:
“The evidence is incontrovertible that none of those measures, in themselves or in combination, achieve the effect of keeping local consumers away from unregulated operators.”
Paul Bittar, the chief executive of the British Horseracing Authority, said:
“There are obviously jurisdictions around the world where those sorts of controls are in place. As to how effective they are, it is debatable.”––[Official Report, Gambling (Licensing and Advertising) Public Bill Committee, ; c.6,Q3, c. 23, Q61.]
Those knowledgeable witnesses cast considerable doubt on the effectiveness of IP blocking and financial transaction blocking. They can be disruptive and labour-intensive, and can result in the blocking of legitimate companies. Because 97% of websites reside on addresses shared with other websites, there is a strong likelihood that blocking a single IP address would block access to multiple sites. Those are all factors that we must take into account in considering the shadow Minister’s proposals.
The shadow Minister rightly mentioned the Ofcom report from 2010. The Ofcom report was indeed about copyright infringement activity. It refers to many measures and says that in some cases they can be effective, but it goes on to indicate that the evidence is mixed about the effectiveness overall. I am making the point that we must be careful; and even if we are careful now, the situation may change in the future. We must of course keep this matter under review. I will keep talking to the industry; we will keep talking to regulators and other colleagues across Government.
I do not feel that it is necessary to add a clause requiring a consultation on the existing use of ISP and financial transaction blocking. Should I or the Secretary of State feel that having a consultation is necessary, we already have, as I am sure the shadow Minister is aware, the powers to do that.
I want to take a moment to highlight to the Committee what consumer protection methods we have and how they are enforced. Then I will say a little more about new clauses 10 and 11. Where illegal operators attempt to target British consumers, the Government and the Gambling Commission are confident that action can be taken, through the existing enforcement mechanisms, to disrupt and stop unlawful gambling. Those include action on illegal advertising, consumer education and, ultimately, prosecution. One of the commission’s key enforcement tools is to take action against third-party carriers of unlawful advertising in Great Britain. That has led to broadcasters, carriers of sponsorship and search engines removing unlawful advertising. It has proved very effective to date.
In addition and if needed, the Gambling Commission has powers to prosecute unlicensed overseas gambling operators, including in absentia. However, it is worth noting that the majority of large gambling operators transacting remotely with Britain-based consumers also have a land-based presence, so if the offshore group company was operating unlawfully, the commission could, depending on the specific circumstances, take action against personal management licensees common to both companies.
Player education is another important tool in combating the use of unlicensed gambling services. The remote reforms will enable the Gambling Commission to provide clear messages to consumers in Britain that they should ensure that they transact only with Gambling Commission licensed operators.
With all those tools already shown to be effective, I do not consider that ISP and financial transaction blocking would be appropriate enforcement mechanisms to include in the Bill, but I will of course continue to review the issue from time to time and take action should we feel that it is necessary to do so.
As for new clause 10, the EC Rome I regulation sets out the rules for determining what law governs any particular consumer contract. Rome I provides that consumer contracts will be governed by the law of the place of the consumer’s habitual place of residence unless the parties expressly choose otherwise. To the extent that the new clause is designed to set down a blanket rule about the choice of law or enforceability of a gambling contract, it conflicts with Rome I and therefore would be unenforceable in English law.
In the majority of cases, the effect of Rome I will be that English law governs the contract entered into by a British consumer with a foreign operator on its website. In the small number of cases in which a different law governs the contract, the Unfair Contract Terms Act 1977 and the Unfair Terms in Consumer Contracts Regulations 1999 still apply to those contracts. Offshore operators cannot deprive consumers of the protections afforded to them under those laws. That is made clear in Gambling Commission licence condition 7, which requires licensees to satisfy themselves that the terms on which gambling is offered comply with those laws.
For those reasons, the new clause is not necessary to achieve the consumer protections sought by the hon. Member for Eltham and I do not intend to accept it.
New clause 11 deals with dormant accounts. I have heard from a number of hon. Members today on that important matter. The Government have been clear, and I have made it clear in Committee and on Second Reading, since my right hon. Friend the Member for Bath (Mr Foster) delivered his report on dormant betting accounts and unclaimed winnings, published in 2011, that we will consider his recommendations after the Bill has been enacted.
We do not need to legislate for any appropriate consultation on a change of licence condition. As the shadow Minister reminded me, we already have powers under the Gambling Act to impose a specific licence condition if we choose to go in that direction.

Gerry Sutcliffe: I hear what the Minister is saying and I shall hold her to her word, because the issue is important. The right hon. Member for Bath has raised the matter on numerous occasions. We have an opportunity. I accept what the Minister is saying. If we do not need legislation, that is fine. However, can we please include the recommendations? It needs to be done. The money is there. It can go into all sorts of good works. It needs to happen.

Helen Grant: I hear exactly what the hon. Gentleman says. His message is loud and clear. I take on board his passion and determination to get the best possible result. He mentioned the extra money that could go towards sport, which is a very good thing.
To make a commitment now to consult on the means to gather information would be premature in advance of considering the recommendations. If in due course we wish to progress the recommendations or we consider it necessary to enhance our understanding in any way, we will act to gather the information and consult in the appropriate way.

Clive Efford: I am not pushing anything to a vote, but there are important issues that we will perhaps return to and they might be discussed in the other place. There are conflicting views about IP and financial blocking. I heard the evidence that suggested that it does not work, and the Ofcom report was prayed in aid in saying emphatically that it did not work. That is what the report said; that is not what it concluded. It stated that there were problems, but it was worth doing, and I think we should take that on board.
We do not suggest that the provision is a silver bullet that would solve the problem. It would be part of a panoply of things. The Minister spoke about education being part of it. Many things would be part of an enforcement and monitoring regime, and IP and financial blocking would add to its strength.
I take the point that the Minister has powers to consult on anything she likes, including IP blocking. On the issue of jurisdiction, if the Gambling Commission cannot deal with matters under its own licensing code—if it cannot take information from other jurisdictions about activities that are not licensed by the Gambling Commission, although operators should be able to influence the Gambling Commission in terms of whether they are fit and proper operators to trade and advertise to customers here in the UK—the Minister should take that on board and include the provision in the Bill.
New clause 11 is a no-brainer. Why would we not include it? I am sure there is support on all sides. We need to be stern with the organisations. They will not cough up money easily, otherwise it would be happening now. We need to ensure that the powers are there, even if that means going back to the 2005 Act to make sure that the Secretary of State already has sufficient powers to require remote businesses, which will become part of the licensing regime when the Bill is enacted, to comply and contribute money that has been gambled by people within the UK. I do not suggest that they should contribute money taken from other jurisdictions, but money that is gambled here or left in dormant accounts or not claimed as winnings should be reported and made available for all the sorts of things that we have discussed.
As my hon. Friend for Bradford South, who has a tremendous amount of knowledge around all these issues, has said, “Please, Minister, take it away and make sure this happens”. I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

New Clause 9  - Consultation on self-exclusion

‘Having regard to the significance of the remote gambling market in relation to potential problem gambling, the Secretary of State shall consult on a system of standardised self-exclusion for the gambling industry, to include means of addressing exclusion from remote gambling access in the context of other gambling media.’.—(Clive Efford.)

Brought up, and read the First time.

Question put, That the clause be read a Second time.

The Committee divided: Ayes 7, Noes 10.

Question accordingly negatived.

New Clause 15  - Application of the horserace betting levy

‘In article 2 of the Gambling Act 2005 (Horserace Betting Levy) Order 2007/2159, for paragraph 3 substitute—
“(3) Subject to paragraph (4), expressions used in sections 24 to 30 of the 1963 Act shall have the meanings given to them by section 55(1) of the 1963 Act (as that provision had effect immediately before 1st September 2007).
(4) For the purposes of paragraph (3), the definition of ‘bookmaker’ as set out in section 55(1) of the 1963 Act (as that provision had effect immediately before 1st September 2007) shall be modified by—
(a) replacing the comma at the end of paragraph (b) of the definition of ‘bookmaker’ with ‘; or’; and
(b) after paragraph (b) of the definition of ‘bookmaker’ inserting—
‘(c) holds an operating licence under the Gambling Act 2005 which authorises that person to provide facilities for betting,’.”.’.—(Clive Efford.)

Brought up, and read the First time.

Clive Efford: I beg to move, That the clause be read a Second time.

Hywel Williams: With this it will be convenient to discuss new clause 16—Power to extend the horserace betting levy to overseas bookmakers —
‘(1) The Secretary of State may by regulations amend any provision or provisions of the Betting, Gaming and Lotteries Act 1963 (c 2) (at a time when the provisions listed in section 15(1)(a) to (c) of the Horserace Betting and Olympic Lottery Act 2004 (horserace betting levy system) have not been entirely repealed by order under that section), the Gambling Act 2005 and/or the Gambling Act 2005 (Horserace Betting Levy) Order 2007/2159 for the purposes of ensuring that each person who holds an operating licence under the Gambling Act 2005 which authorises that person to provide facilities for betting shall be—
(a) liable to pay the bookmakers’ levy payable under section 27 of the Betting, Gaming and Lotteries Act 1963 (c 2); and
(b) subject to the provisions of section 120 of the Gambling Act 2005 (as modified in accordance with the Gambling Act 2005 (Horserace Betting Levy) Order 2007/2159) if that person is in default of such bookmakers’ levy.
(2) Regulations under this section must be made by statutory instrument.
(3) A statutory instrument containing regulations under this section may not be made unless a draft of the instrument has been laid before and approved by a resolution of each House of Parliament.’.

Clive Efford: New clause 15 amends the definition in the Betting, Gaming and Lotteries Act 1963 of what constitutes a “bookmaker”. New clause 16 offers the Minister the opportunity to use the Bill to take some reserve powers. As my hon. Friend for Bradford South mentioned, opportunities to legislate on gambling matters do not come around very often. If we do need primary legislation to amend the levy, this is an opportunity to do so. We are saying to the Minister, “Go away and consult on the most appropriate way to deliver that, and then you can implement it without the need to come back here.”
This is an important area, especially for the horse racing industry. In 1961, Parliament established the horserace betting levy. Its duty is to act in accordance with the provisions of the 1963 Act and to collect a statutory levy from the horse racing business of bookmakers and the Tote. The levy is collected from bookmakers as a percentage of the gross profit on their horse race betting business. The majority of the levy income is distributed by the horserace betting levy board in direct support of horse racing. The Act states that the levy income must be spent on matters including improving the breeds of horses, the advancement and encouragement of veterinary science and veterinary education, and improving horse racing. Parliament’s original intention when establishing the levy was to provide a means of compensating racing for the loss of attendance that was anticipated when off-course betting shops were legalised in 1961.
Today, the levy is still seen as a vital mechanism for ensuring that racing can secure an income for those who use its products. While operationally it has its issues, the principle remains sound—I am sure that all the members of the Committee would endorse that. British racing is the country’s second most popular sport. Some 5.6 million people attended events in 2012. It is the second largest sporting employer. British racing is predominantly a rural industry, and it makes a significant contribution to the British economy, generating about £3.45 billion in annual expenditure and providing direct and associated employment for 85,000 people. There are 58 racecourses across the country, all of which play a vital role in their local communities staging international festivals, national races and local racing.
The yield to racing from the horserace betting levy has fallen from an average of £106 million between 2003 and 2009, the period during which the vast majority of remote betting operators relocated operations offshore, to just £66.7 million in 2012-13. As for knock-on effects, the number of horses in training has fallen by 10.6% between 2008 and 2012, while foal production was down 26.3% over the same period. Betting on racing has remained popular and volumes have held up; it is just that many of the bets are now placed in a way that means the levy is no longer paid.
The move by many betting operators in recent years to offshore locations for their remote gambling arms is the main contributory factor to the decline of the levy. Betting operators licensed offshore for remote operations are not liable to pay the levy on their gross profits on British racing from those sources. The British Horseracing Authority describes that as “free riding”.
The Remote Gambling Association told us last week that the reason for going overseas was the competitive taxation situation, but the knock-on effect has been a move out of jurisdictional responsibility for paying the levy, which is damaging racing. The situation is unfair to horse racing and to those that pay through the levy mechanism, such as Bet365, by entering voluntarily into commercial deals, such as Betfair, or by making arrangements with the sport, such as William Hill, Ladbrokes, Coral and Betfred. British racing estimates that around £20 million a year in potential levy receipts is lost to the industry from offshore remote gambling.
I do not believe that anyone who has held the post of Minister for Sport has not felt that the principle of the horserace betting levy is sound and that Parliament was right to introduce it. Of course, after more than 50 years, both the legislative framework of the levy and the way in which modern betting business is conducted have thrown up challenges. In 1963 we did not have the single European market and rules on state aid, and nor did we have the worldwide web and the opportunity to offer betting remotely. The legislators then could never have envisaged those changes and it is grossly unfair that racing is left to suffer the consequences.
Those dynamics have changed how we bet and the legislation of the 1960s is in places showing its age. That is why it is so important to correct at least one of the problems—I suggest it is the largest one—with the levy. The racing community tells me that it is the one that would make the most significant difference to its funding.
The proposals in the Bill were first put forward in 2010 by the then Minister with responsibility for sport and gambling, my hon. Friend the Member for Bradford South. In the initial consultation document, he noted the importance of this issue and said that officials were working on a solution. He said on 7 January 2010, when launching the consultation document, “New British Licence Requirements for Overseas Online Gambling Firms”:
“In terms of the Horserace Betting Levy, I remain firmly of the view that all operators taking bets on British races should pay their fair share. There is more to do but I am committed to making sure this happens.”
Subsequently he issued an informal consultation and started to build a policy case. Sadly, the general election then happened, and there has been little progress since.
Since then, the hon. Member for Weston-super-Mare (John Penrose) and the right hon. Member for Faversham and Mid Kent (Hugh Robertson) have been the Ministers responsible, but perhaps the new Minister will tell me how much her Department has put into the matter, and why a Bill has been introduced to deal with overseas operators regarding regulation and, subsequently, taxation, yet nothing has been done for horse racing.
On Second Reading, I set out the chronology of the issue and how Parliament has dealt with it. In 2010, the then Minister responsible for tourism, heritage and gambling, the hon. Member for Weston-super-Mare, responded to a parliamentary question by saying:
“We will be discussing the options with the Levy Board and the racing and betting industries with a view to ensuring the funding for racing is fair, and collected from as broad a base as possible.”—[Official Report, 4 November 2010; Vol. 517, c. 911W.]
At the conclusion of a Westminster Hall debate in 2011, he said:
“It has also been pretty much universally agreed in today’s debate that the current levy system is old-fashioned and, if not broken, in the process of breaking…It is absolutely right for the House to urge the Government to come up with concrete proposals before the end of the year, and I am happy to accept that challenge, in line with the mood of the House.”—[Official Report, 20 January 2011; Vol. 521, c. 1067WH.]
However, since then, we have heard nothing. On 14 July 2011, the Minister announced the Government’s intention to introduce point of consumption licensing for remote gambling, but no commitment was made on overseas betting operators paying the levy.
On 6 November 2012, the then Minister for Sport, the right hon. Member for Faversham and Mid Kent, wrote in a letter to Paul Lee, the chairman of the horserace betting levy board:
“If we are going to replace the Levy, we need to be sure we do it properly and with a structure that is sustainable, enforceable, legally sound and one capable of removing government from the process. My preference is for any replacement to be implemented via primary legislation.”
He therefore granted the levy board six months, later extended to 12 months, to facilitate a multi-year agreement between racing and betting, including the offshore element.
On 3 December 2012, the Government published the draft Gambling (Licensing and Advertising) Bill. It contained no provision in respect of offshore operators contributing to the levy under a point of consumption licensing regime owing to Government concerns about such a measure under state aid rules. On 25 January 2013, the hon. Member for Thirsk and Malton (Miss McIntosh) took control of a private Member’s Bill relating to remote gambling, but the Government again resisted on the basis of state aid rules. Coming up to date, on 19 June this year, the European Commission approved the French proposal for a parafiscal levy on online horse race betting, stating that
“by spreading the burden of financing races equitably between the different operators, the measure allows fair competition between these operators in the newly liberalised market for online horse-race betting.”
On 31 October, in answer to a question I asked about the offshore betting industry, the Minister said:
“I agree with the hon. Gentleman to a certain extent, because the levy was created 50 years ago and does not completely deal with modern betting and racing practices, so, as I have previously said, I will consult. We will take evidence and look at the situation very carefully indeed, and try to find a modern, sustainable and enforceable legal solution.”—[Official Report, 31 October 2013; Vol. 569, c. 1062.]
On Second Reading, she said:
“I also want to consider the question of levy reform more broadly as there might be other options that should be considered and there should be proper consultation before any measures are put in place. I will consult on any options that are sustainable, enforceable and legally sound.”—[Official Report, 5 November 2013; Vol. 570, c. 174.]
We are all in agreement that something needs to happen. We are all on the same page about wanting to see action on the levy. The new clauses would allow us to capture the revenue that should be paid into racing, as Parliament has already determined, from all betting operators that take online and telephone bets on British racing in Britain, wherever they are located. In effect, they would allow us to secure levy payments from exactly those operators that will eventually be brought into the remit of the UK tax regime and will require a Gambling Commission licence to continue to operate in the British market.
It is estimated that such a change in arrangements would be worth about £20 million a year to British horse racing, and it would undoubtedly lead to a healthier sport, and more investment, growth and jobs. It would also create a level playing field among all betting operators. Why should onshore betting operators and those with betting shops pay the full levy while others that are based overseas and do not have a voluntary agreement with British racing do not pay a penny? That unfairly distorts competition. I am sure that my hon. Friend the Member for Newcastle-under-Lyme would agree. Bet365, which has remained onshore and has paid its levies, is located close to his constituency and provides many jobs.

Paul Farrelly: I want to put on the record the fact that Bet365 also provides employment in the constituency of Staffordshire Moorlands, the representative of which is a member of the Committee.

Clive Efford: As my hon. Friend has said, the fact that Bet365 has remained onshore has not meant that it has suffered in terms of competition or its ability to generate profits, which suggests that some of the concerns about over-regulation are unfounded. We do not want regulations that are too light-touch. Bet365 must be respected for remaining onshore and making a contribution, as an online betting company, to the betting levy.
I understand the frustration of those in the racing industry, who see the Government acting to require overseas betting operators to comply with Gambling Commission regulations, to pay the social responsibility levy, which is a voluntary arrangement, and to pay tax. The only area that will not be harmonised is the requirement to pay the levy. Parliament has already decreed that overseas operators should pay it. It is for the Minister to explain why the Government have not acted further and faster on racing. No doubt the many tens of thousands who work in the sport and the millions who follow it will be listening carefully to what the Government have to say on this matter.
The Bill as drafted does not make any provisions for racing or the horserace betting levy. The sport will not, therefore, receive a return from remote betting activity when it is licensed in the UK by the Gambling Commission. The Government have consistently said that any reform to the levy to capture revenues under a point of consumption licensing regime would constitute state aid. However, that should be a concern of the past, because a recent and comprehensive ruling from the European Commission has addressed that issue. As the British Horseracing Authority said in written evidence:
“A French parafiscal levy on online horserace betting has been approved, recognising Racing’s special status and common interest with the betting industry. It sets a vital precedent and is in the process of being reviewed by DCMS lawyers”.
New clause 15 would update the term “bookmaker”, as contained in the Betting, Gaming and Lotteries Act 1963, to mean that all those who hold an operating licence under the Gambling Act 2005 are deemed to be a bookmaker. The levy board already operates by collecting levies from those who hold a licence. The change would see that extended to overseas operators. Anyone who refuses to pay would be reported to the commission by the levy board as being in breach of their licence. The levy would therefore have holistic coverage. All operators who hold a Gambling Commission licence, whether they are licensed betting offices or remote operators, would be required by law to make levy contributions.
I am of the view that the Bill would de facto do that anyway. It was thought that the act of bringing companies within the onshore regulation regime would bring them into the remit of the Bill, but the DCMS lawyer who gave evidence to us last week ruled that out. I therefore think it best that we rely on new, clear legislation rather than having another round of dispute, delays and messy court cases that will only hurt racing.
New clause 15 would make those things clear. It addresses a significant weakness, and should be enacted now. The Minister may want to look at a more modern and commercial framework for the levy in the long term—something that I know racing would support. However, with the best will in the world, the sport will be waiting several more years for that. In the meantime, racing will be losing out on that vital source of income.
Action has been required on this issue for several years, and the Government must not allow this once-in-a-Parliament opportunity for primary legislation to pass without attempting to resolve it. Otherwise, the promises they have made to the racing industry since 2010 will appear somewhat hollow.
The purpose of new clause 16 is to create a reserve power. It was first suggested to me by the horse racing authorities, which were looking to be constructive in their proposals. We understand that the DCMS might feel that there is a need for further consultation and for further assessment of the implication of the European Commission’s ruling on state aid. This reserve power allows that to happen, giving the Minister the opportunity to consult with the Commission. When the work is complete, if this route of action is the right one, it allows the Minister to deal with the issue.
Surely the Minster can accept this. If not, she must explain why she is rejecting it not only to this House, but to all those on her Benches who support this form of action and the millions in the racing community. This is an opportunity for cross-party unity to set in motion a solution to this problem. I counsel the Minister that there is considerable interest in this issue in the other place, including the very active all-party group. I strongly urge her to accept this amendment or bring forward her own improved amendment, if that is possible, to meet the will of the House. I commend these new clauses and I look forward to hearing the Minister’s response.

Gerry Sutcliffe: I want to reinforce what my hon. Friend the Member for Eltham has said from the Front Bench. This is an opportunity to resolve an issue that has been ongoing for many years. The Minister—and long may she remain in her post until the next election—will be lobbied incessantly by racing and betting on this issue. The good news this year is that there has been no determination, and in fact, both sides of the industry—horse racing and betting—have come together to get to a levy conclusion, which is great news. However, we still have the milestone-round-the-neck of the horse racing levy in reserve, if you like, if those commercial negotiations cannot be concluded. My hon. Friend is right that this is an opportunity to get both sides of the industry round the table to finally get to a conclusion to set the future relationship between racing and betting. They both rely on each other; why they cannot get to a commercial agreement for a longer period remains a problem.
My hon. Friend has talked about the significance that the horse racing industry has to the economy of many rural areas—race courses and so on. It needs to be adequately funded if it is to be maintained in its proper regime. The Bill will make things worse. If the offshore people that are coming onshore do not contribute to the levy, it is not a fair situation and I suspect that the Minister will have her door knocked upon almost every day by the horse racing industry if we do not get to some sort of conclusion. New clauses 15 and 16 offer a way out for the Minister. The former sports Minister gave evidence, in good faith, to say that he thought the issue of state aid was a problem. That does not seem to be a problem now, so there is an opportunity here to get this matter resolved. I urge the Minister to look at new clause 15 and if she accepts that, fine, but new clause 16 certainly gives a fall-back position. I am sure, as my hon. Friend said, that if we cannot sort this out here today, it will be well debated in the other place, given the horse racing fanatics that are in the House of Lords, and I am sure that we will be returning to it on Report.

Helen Grant: I am not sure that I understand quite what the hon. Member means by the horse racing fanatics in the other place, but I look forward to finding out.
New clauses 15 and 16 seek to extend liability to pay the horse race betting levy to offshore bookmakers who hold the Gambling Commission licence. I accept that the form of the levy has been an issue for some time and there is a feeling that the Bill provides an opportunity to take this forward, and at the very least, extend liability to pay the levy to offshore bookmakers As I said in answers to the Committee last week, I do not believe we should assume that genuine levy reform lies in merely extending the existing levy scheme, which is now more than 50 years old and does not reflect the modern betting and industries. Therefore, I think that the fairest and most effective way to deal with reform of the levy is to understand and assess options for reform and to consult widely on the sustainable, enforceable and legally sound options that emerge. Genuine levy reform cannot be achieved by the new suggested clauses, only an extension of the current levy.
As I said very carefully—I hope—last week, any extension of the levy to offshore bookmakers as a result of the new clause will need EU Commission approval, because the levy is an existing state aid scheme. I am also not convinced that we should be seeking EU approval for an extension of the current levy when we do not know that that will satisfy the need for proper reform, nor am I prepared to risk jeopardising the financial stability that has been achieved by the four-year voluntary agreements by extending the levy to offshore bookmakers without approval.
The shadow Minister raised the progress to date made by other Ministers. Previous Ministers have held various meetings at various times with a number of people, probably including those referred to in the House of Lords. That has culminated in the four-year deal that was struck recently, and we were very glad that happened, as was referred to by the hon. Member for Bradford South. At the very least, it gives us time. It gives us four years to put our heads together to try and find a solution.
As for taking the power set out in new clause 16 and referred to by the shadow Minister, there has not been proper consultation, and I am not prepared to take a power that may not be appropriate given the lack of clear options being presented at this stage.
Therefore, for all the reasons I have stated, I do not intend to accept either new clause 15 or new clause 16. However, I reassure hon. Members that I want to take the opportunity that has been created by the financial stability of the four-year voluntary agreements to take a proper look at levy reform, and to consult widely on the sustainable, enforceable and legally sound options that emerge.

Clive Efford: I am disappointed by the Minister’s approach, because this area is incredibly important. It is not as though it is a surprise that we are here with this legislation. We have set out its chronology. It has been around since 2009, when my hon. Friend the Member for Bradford South first identified the issue, and it has been consulted on over a long period of time. In fact, it goes back longer than that. It was discussed around the time of the 2005 Act, so it probably goes back nine years. We knew that legislation on remote gambling was coming, and as I have said, several previous Ministers have referred to the need to review the levy.
The Minister says that it is not appropriate at this time just to have an extension and then deal with the matter, but she then goes on to say that there is a problem with accepting a reserve power, because we are nowhere near knowing what to consult on. We are being told that it will be a long time. We know that the opportunities to legislate are few and far between, so in the meantime, racing goes on losing a considerable sum of money, and people estimate that to be in the region of £20 million a year. I say to the Minister that that is not acceptable. I think we can revise the 1963 Act and modernise the term “bookmaker”, so that it covers all those who offer betting on horse racing to customers here in the UK, whether they are remote or land-based, so that in the meantime, a levy is collected, and in the fullness of time, if we have to modernise, we have time to do so.
The Minister says no to a reserve power. We understand that this is a complex issue, which is why the reserve power was proposed. That is why we are saying, “Go away and consult.” The reserve power would give a time scale. What we have is an unlimited, open-ended commitment—they are saying, “We may do it sometime or never”—to introduce a levy that will satisfy the horse racing industry and make it sustainable in the future. This is an important rural industry.
Apart from the general case for the reserve power, there is a moral case for it as well. A great deal of money is invested in the sport to create racing. Horse racing is symbiotic with gambling. We know that the two have been closely associated for many years, but recently we have seen an increasing number of betting operators that make money from the horse racing industry and do not contribute back. In fact, they have gone offshore and are not contributing the full amount to the levy, despite some of the agreements that have been made, which I do not criticise.
It is not a satisfactory situation, but there is a moral obligation on those who make huge sums of money on horse race betting and who put nothing back into the industry. The Minister has got this wrong and I want her to go away and think more about this issue. We will press these two new clauses to a vote, because we have an opportunity to deal with the matter. We can introduce a levy in the interim while the Minister consults, and then we can deal with this matter once and for all after that. This opportunity should not be missed.

Question put, That the clause be read a Second time.

The Committee divided: Ayes 7, Noes 10.

Question accordingly negatived.

New Clause 16  - Power to extend the horserace betting levy to overseas bookmakers

‘(1) The Secretary of State may by regulations amend any provision or provisions of the Betting, Gaming and Lotteries Act 1963 (c 2) (at a time when the provisions listed in section 15(1)(a) to (c) of the Horserace Betting and Olympic Lottery Act 2004 (horserace betting levy system) have not been entirely repealed by order under that section), the Gambling Act 2005 and/or the Gambling Act 2005 (Horserace Betting Levy) Order 2007/2159 for the purposes of ensuring that each person who holds an operating licence under the Gambling Act 2005 which authorises that person to provide facilities for betting shall be—
(a) liable to pay the bookmakers’ levy payable under section 27 of the Betting, Gaming and Lotteries Act 1963 (c 2); and
(b) subject to the provisions of section 120 of the Gambling Act 2005 (as modified in accordance with the Gambling Act 2005 (Horserace Betting Levy) Order 2007/2159) if that person is in default of such bookmakers’ levy.
(2) Regulations under this section must be made by statutory instrument.
(3) A statutory instrument containing regulations under this section may not be made unless a draft of the instrument has been laid before and approved by a resolution of each House of Parliament.’.—(Clive Efford.)

Brought up, and read the First time.

Question put, That the clause be read a Second time.

The Committee divided: Ayes 7, Noes 10.

Question accordingly negatived.

Bill to be reported, without amendment.

Committee rose.